ABU DHABI — The UAE Ministry of Finance said on Thursday that it will start disbursement of the Dh70 billion fund to banks announced earlier this month.
The ministry said in a statement, according to Emirates News Agency (Wam), that banks have been notified of the requirements of payment and transfer.
It said that cash from the fund would be provided to banks on the basis of interest rate payable every three months, calculated on the prevailing interest rate for the 5-year
It said banks could only use this facility to support the capital and lending capacity in the financial system.
“Banks primarily shall use this disbursement to improve their liquidity and capital positions in the light of this slowdown in the global economic conditions. Banks shall closely monitor their capital and liquidity positions and immediately undertake measures to improve any gaps.”
The ministry said that banks should ensure these funds are used to support the local economy. “Banks shall emphasize business practices supporting the local banking system and economy, and not to indulge in speculative opportunities in local and foreign markets.
“Banks shall actively participate in the inter-bank market, especially for placements in order to ensure liquidity flow to the system, provide access for credit facilities to small and medium enterprises at reasonable prices and continue to actively engage in and provide financing to the trade sector and the main cornerstone sectors of the UAE economy.”
The statement said banks must support the development of the local banking sector. “Banks shall develop strategic plans to ensure that they are prepared for a slower growth era in credit, invest in their risk management practices to ensure they meet the requirements defined by the central bank.”
The ministry said that banks must fulfil the central bank’s guidelines that were key to the health of the system; such as exposure limits and deposit to loan ratio. The statement said that banks that do not meet these guidelines, have six months to comply.
The ministry said that banks would have to provide transparent and timely information to the ministerial committee and the central bank as and when requested. The statement said the ministerial committee and central bank would take necessary actions in case it is believed that the above objectives were not met.